Community Health Systems, Inc. · NYSE:CYH
Community Health Systems — Q4 2015 Earnings Presentation
36 slides from Community Health Systems's earnings presentation, February 2016
Slide 1: Investor Presentation Fourth Quarter Ended December 31, 2015
Investor Presentation Fourth Quarter Ended December 31, 2015 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws that involve risk and uncertainties. All statements in this presentation other than statements of historical fact, including statements regarding projections, expected opera
Slide 3: Community Health Systems
Community Health Systems • Founded in 1985 • NYSE Listed Company since 2000 Symbol: CYH • 195 Hospitals in 29 States • Over 1 Million Annual Admissions • Over 5 Million Annual ED Visits • 137,000 Employees • 22,500 Physicians on Medical Staffs, including approximately 3,380 employed physicians 3
Slide 4: CHS – An Experienced Operator
CHS – An Experienced Operator 2014 vs. 2015 YE 2013 YE 2014 YE 2015 Change Non-GAAP Net Operating Revenues $12,819 $18,639 $19,606 5.2% Adjusted EBITDA ** $1,860 $2,777 $2,839 2.2% EPS from Continuing Operations $ 2.60 $ 3.24 $ 3.29 -1.5% Excluding Adjustments (1) ($MM) 22,500 Revenues Adjusted EBIT
Slide 5: Serving Non-Urban and Select Urban Markets
Serving Non-Urban and Select Urban Markets 195 Hospitals 29 States TOP FIVE STATES YE 2015 % of Hospitals Revenue Florida 26 13.4% Pennsylvania 19 11.4% Texas 17 9.9% Indiana 9 7.8% Tennessee 19 6.9% 5
Slide 6: Spin-Off Transaction Overview
Spin-Off Transaction Overview Spinning off a group of 38 hospitals and Quorum Health Resources, a leading hospital management and consulting business (collectively, “Quorum Health”) For nine months ended September 30, 2015: Proposed Revenue of $1.6 billion Adjusted EBITDA of ~$186 million**
Slide 7: Diversified and Attractive Portfolio of Hospitals
Diversified and Attractive Portfolio of Hospitals 38 Hospitals across 16 states with 3,592 licensed beds Springfield Lock Haven Waukegan (2) Evanston Sunbury Blue Island Tooele Galesburg Massillon Watsonville Louisa Granite City Mesquite Red Bud Mt. Vernon Paintsville Marion Williamston Anna Jackson
Slide 8: Quorum Health’s Two Complementary Businesses
Quorum Health’s Two Complementary Businesses Quorum Health 2014 Revenue 2014 Adj. EBITDA $2.1 billion ~$265 million** Hospital Operations Quorum Health Resources 38 Hospitals; 16 states; 3,592 licensed beds Provides management services to 96 non- affiliated hospitals and consulting services to
Slide 9: Corporate Strategy for Consumer-Driven Healthcare
Corporate Strategy for Consumer-Driven Healthcare Build Deliver Care Clinical Demonstrate Services and More Integration & Quality Infrastructure Efficiently Collaboration 9
Slide 10: Demonstrate Quality: Reduction of Serious Safety Event Rate
Demonstrate Quality Consistent Reduction of the Serious Safety Event Rate High Reliability Using techniques from high-risk industries like nuclear power and aviation to create inherently safe hospital environments -10.0% -15.5% -20.0% -25.0% -30.0% -35.0% -45.0% -40.0% -56.0% -50.0% -63.3% -60.0% -6
Slide 11: Joint Commission Top Performers on Key Quality Measures
Demonstrate Quality 118 Hospitals Joint Commission Top Performers on Key Quality Measures in 2015 Consistent Improvement Year After Year 130 118* 120 107 110 100 93 86 90 80 73 70 60 2011 2012 2013 2014 2015 2011 – 2013 include CHS and HMA combined. *25 Facilities are 5-Time Honorees. 11
Slide 12: Build Services and Infrastructure
Build Services and Infrastructure • Regional Networks • Access Points • Service Line Approach • Emergency Medicine 12
Slide 13: CHS Regional Network
CHS Regional Network Rockwood Health System • 2 hospitals • 460 physicians Lutheran Health Network • 8 hospitals Northwest Healthcare • 1,200 physicians • 2 hospitals • 640 physicians Valley Care Health of Ohio • 3 hospitals • 600 physicians Commonwealth Health • 6 hospitals • 860 physicians Tennova
Slide 14: CHS Regional Networks – Lutheran Health Network
CHS Regional Networks – Lutheran Health Network Physician 87 Offices/Clinics Urgent Care/ 9 Occupational Health Outpatient 11 Clinics Ambulatory 4 Surgery Centers 8 Hospitals 14
Slide 15: Access Points
Access Points 60 Surgery Centers 44 Urgent Care Centers 6 Freestanding EDs 164 Diagnostic Centers 1,600 Physician Clinics 15
Slide 16: Delivering Care More Efficiently
Delivering Care More Efficiently Shared Resources for Productivity Improvement, Cost Controls, and Quality Improvement • Acquisitions • Financial Reporting • Managed Care • Ancillary Services • Group Purchasing • Physician Practice Management • Billing and Collections • Health Information Management
Slide 17: Clinical Integration and Collaboration: Physician Recruitment
Clinical Integration and Collaboration Physician Recruitment 4,500 4,152 4,000 3,765 3,500 3,000 2,500 2,125 2,141 1,864 2,000 1,500 1,000 500 0 2011 2012 2013 2014 2015 • Over 14,000 physicians recruited over the past 5 years • 1,260 mid-level licensed professionals employed as of December 31, 2015
Slide 18: Q4 2015 Results of the Affordable Care Act
Q4 2015 Results of the Affordable Care Act Data from Same Store* – Hospital Volume Only % Change in Adjusted Admissions Q4 2015 YE 2015 Self Pay Medicaid Self Pay Medicaid All States -2.5% -0.2% -8.3% +5.6% Expansion States -22.0% +7.8% -22.9% +10.1% Estimated $75 million and $290 million of EBITDA
Slide 19: Consolidated Payor Mix
Consolidated Payor Mix Year Ended Year Ended 12/31/2015 12/31/2014 11.2% 10.8% 52.4% 51.5% Medicaid Managed Medicaid Managed Care & Other Care & Other 24.1% 24.7% 12.3% Medicare 13.0% Medicare Self-Pay Self-Pay 19
Slide 20: HMA Acquisition Achieved $280 Million of Synergies
HMA Acquisition • Overhead and Corporate Service Reduction • Supply and Expense Management Achieved $280 Million of synergies • Case Management within 2 years • Revenue Cycle Management/ Contract Negotiations $125 million synergies achieved in 2014 $25 million incremental synergies achieved in Q4 20
Slide 21: Q4 2015 Highlights
Q4 2015 Highlights Note: The results below, including Non-GAAP Net Operating Revenues, exclude the $169 million change in estimate for the provision for bad debts recorded during the three months ended December 31, 2015. The information in this presentation should be reviewed together with the press
Slide 22: Q4 2015 Other Information
Q4 2015 Other Information Note: The results below, including Non-GAAP Net Operating Revenues, exclude the $169 million change in estimate for the provision for bad debts recorded during the three months ended December 31, 2015. The information in this presentation should be reviewed together with th
Slide 23: Cash Flow and Capital Expenditures
Cash Flow and Capital Expenditures Cash Flows from Operations CHS Capital Expenditures ($ in millions) ($ in millions) HMA $1,822(1) $953 $853 $777 $769 $1,262 $1,280 $1,089 $614 $1,046(1) $388 $542 $596 $301 $274 $227 (1) See slide 33 for reconciliation of adjusted cash flows provided by CapEx % of
Slide 24: Comparative Adjusted Cash Flows from Operation Reconciliation
Comparative Adjusted Cash Flows from Operation Reconciliation $ in millions Adjusted Cash Flow from Operations – 2014 $ 1,822 Net Income Tax Payments of $12 million in 2015 compared to (192) Income Tax Refunds of $180 million in 2014 Higher interest payments in 2015 due to timing of debt payment
Slide 25: 2016 Adjusted EBITDA Improvements
2016 Adjusted EBITDA Improvements Estimate ($ in millions) Improvement from Affordable Care Act $50-75 Synergies and margin improvement from HMA $50 Payor mix/volume improvement $50-$100 Improvements in physician practice performance, centralizing our $60-$70 payroll processes, and health in
Slide 26: Why CHS has Long-Term Opportunities
Why CHS has Long-Term Opportunities • Improvement in the reduction of self-pay to insurance through Affordable Medicaid or Exchanges) Care Act • Approximately 43% of our revenues are in states that have expanded Medicaid • HMA’s adjusted EBITDA margin was approximately 12% in 2013 vs. 15-16% HMA in
Slide 27: Focused Strategy Delivers Results
Focused Strategy Delivers Results Experienced Quality Management Improvements Attractive Company Markets Growth Geographic Acquisition Diversity Opportunities Consistent Proven Financial Formula Performance 27
Slide 28: Other Financial Information
Other Financial Information
Slide 29: CYH Unaudited Supplemental Information
CYH Unaudited Supplemental Information EBITDA is a non-GAAP financial measure which consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to exclud
Slide 30: CYH Unaudited Supplemental Information
CYH Unaudited Supplemental Information The following table reflects the calculation of Adjusted EBITDA, as defined, from (loss) income from continuing operations before income taxes and reconciles Adjusted EBITDA to net cash provided by operating activities as derived directly from the condensed con
Slide 31: CYH Income Summary
CYH Income Summary Note: The results below, including Non-GAAP Net Operating Revenues, Adjusted EBITDA, Adjusted EBITDA Margin and EPS from Continuing Operations Excluding Adjustments per Share, each exclude the $169 million change in estimate for the provision for bad debts recorded during the thre
Slide 32: CYH Diluted EPS – Excluding Adjustments
CYH Diluted EPS – Excluding Adjustments Q4 2015 Q4 2014 YE 2015 YE 2014 Net (loss) income, as reported $ (0.73) $ 0.87 $ 1.37 $ 0.82 Discontinued operations 0.08 0.26 0.31 0.51 Loss from early extinguishment of debt - - 0.09 0.40 Amortization of software to be abandoned - - - 0.42 Impairment of long
Slide 33: Analysis of Operating Cash Flow
Analysis of Operating Cash Flow ($ in millions) YTD YTD 2015 2014 Cash flows provided by operating activities, as reported $ 921 $ 1,615 HMA integration expenses, CVR related payments, and 29 82 payment of a previous HMA government liability Government settlements and related legal expenses 153 99 E
Slide 34: QHC Appendix
QHC Appendix ts} Communit y ose CHS Health Systems, Inc.
Slide 35: QHC Unaudited Supplemental Information
QHC Unaudited Supplemental Information EBITDA is a non-GAAP financial measure which consists of net income attributable to Quorum Health Corporation, before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude the impact of net income (loss) attrib
Slide 36: QHC Unaudited Supplemental Information
QHC Unaudited Supplemental Information The following table reconciles Adjusted EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands): Nine Months Ended Twelve Months Ended September 30, December 31, 20
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